Understanding RMDs - You turned Age 70½ THIS year

The deadline for withdrawing your first RMD is April 1 of the year after the year in which you attained the age 70½.  You should understand that if you delay your first RMD until the year after you turn age 70½, you will need to withdraw your second RMD in the same tax year (by December 31).  This may have unintended tax consequences.

There are a number of variables that will be used to determine the amount of your RMD that you will be required to withdraw.  The first variable is your age.  Each year, your age at the end of that year will be used to determine your life expectancy factor using the appropriate IRS table (see IRS Publication 590).

The second variable used to determine your RMD for any given year is the age of your designated beneficiary.  In most cases, you will use the Uniform Life Table to determine your life expectancy factor.  However, if your spouse is more than 10 years younger and the sole beneficiary of your IRA you may use the Joint and Last Survivor Table, which results in a smaller RMD each year.

Once you have determined the appropriate IRS table, you will use that table to locate your life expectancy factor.

The last variable will be your account balance as of December 31 of the year prior to the year for which you are calculating your RMD.  You will divide this account balance by the life expectancy factor which will result in your RMD amount for the given year.

Example:You will turn 70 on March 3, 2011.  Therefore, your first RMD will be for 2011 as you will attain age 70½ on September, 3.  To determine your RMD, we will assume that your Spouse, who is only 2 years younger, is your designated beneficiary.  We will use the Uniform Life Table and determine that the Life Expectance Factor for an individual that will be 70 years old (your attained age as of December 31, 2011) is 27.4.

If your account balance on December 31, 2010 was $50,000, your RMD for 2011 would be $1,825 (50,000/27.4).  You must recalculate your RMD amount each year.  Depending on any gain/losses in your account, your RMD will change from year to year.

You may find our Required Minimum Distribution Calculator helpful in determining your RMD for any given year.

Now that you have determined your RMD amount for the year, you must withdraw at least that much from your account by the end of the year (or by April 1 of next year, if you have elected to delay your first RMD).  To elect your withdrawl simply complete an IRA Distribution Request Form, using "Normal Distibution" as the reason.

You may wish to satisfy your RMD on a more automated basis.  The best way to accomplish this is to determine your current RMD amount, then determine a periodic (monthly, quarterly, etc...) installment payment that could be initiated that would satisfy your RMD for the year.  To reduce the frequency in which you will need to alter this installment schedule, you may wish to take a little more than required. 

Since your balance will fluctuate with any gain/losses on your account, it is still your responsibility to calculate your RMD annually and ensure that the sum of your installment payments will satisfy your RMD each year.